Building Infrastructure Projects Like Highways,...

What is ‘project finance’? The term features prominently in the press, more specifically with respect to infrastructure, public and private venture capital needs. The press often refers to huge projects, such as building infrastructure projects like highways, Eurotunnel, metro systems, or air- ports. It is a technique that has been used to raise huge amounts of cap- ital and promises to continue to do so, in both developed and developing countries, for the foreseeable future. While project finance bears certain similarities to syndicated lending, there are a host of specific issues that mean that it is essentially a specialized dis- cipline unto itself, effectively a discrete subset of syndicated lending. P roject finance is generally†¦show more content†¦These various participants have differing contractual obligations, and the resultant risk and reward varies with the function and performance of these various parties. Ideally, the debt servicing will be supported by the project cash flow dynamics as opposed to the participants, who at best provide limited coverage. 2.Main Legal Contractual Foundations P roject finance transactions are complex transactions that often require numerous players in interdependent relationships. To illustrate, we provide an organization diagram of the various players seen from the viewpoint of an agent bank in a generic project finance transaction: ââ€"   The core of a project financing is typically the project company, which is a special purpose vehicle (SPV) that consists of the consortium share- holders (such as contractors or operators who may be investors or have other interests in the project). The SPV is formed specifically to build and operate the project. The SPV can be structured either as a local project company or a joint venture ( JV) consortium. ââ€"   The SPV is created as an independent legal entity, which enters into contractual agreements with a number of other parties necessary to the project. The contracts form the